Meet the Raleigh native helping TikTok stars become venture capitalists
Josh Richards has the kind of success that would’ve been unthinkable a decade ago.
The 19-year-old, in the course of just a few years, has become the quintessential “influencer,” a new class of entrepreneurs who cash in on their immense followings by marketing and advertising products across their different platforms.
For Richards, those platforms include the video site TikTok (where he has 25.2 million followers), Instagram (7.3 million followers) and YouTube (2 million subscribers). Already, the teenager has a net worth of $22.5 million from a variety of deals, like a podcast he does with Barstool Sports founder Dave Portnoy, Vanity Fair Magazine reported.
But that’s not enough for Richards — and increasingly for other social media superstars. They are looking for new monetary outlets and ways to make sure the money keeps flowing if, and when, videos of them dancing stop attracting as many eyeballs. Last year, Richards told Forbes he wanted to become the first social media billionaire.
Rather than just hawking products for companies, Richards wants to be an investor, and he’s turning to a Raleigh native to help him jump into the world of venture capital.
In March, Richards and Marshall Sandman launched Animal Capital, a firm that wants to write angel checks to early-stage startups. Animal Capital is also enlisting Richards’ fellow TikTok stars Griffin Johnson and Noah Beck in the effort, as well as Michael Gruen, of the talent management company TalentX.
Sandman, 29, helped start Animal Capital while holed up in Raleigh during the COVID-19 pandemic, retreating south from New York City after it shut down in the early weeks of the pandemic.
Sandman — the son of prominent Raleigh lawyer and real estate developer Michael Sandman — met Richards via a mutual friend who recommended Sandman based on his prior experience banking at Goldman Sachs and working in venture capital for WarnerMedia.
“They loved the idea of venture investing, but didn’t know what to do,” Sandman said in a telephone interview with The News & Observer. “No one was looking out for them,” but they were being approached by hundreds of startups for advertising deals.
“They have 110 million unique followers across the three of them (Richards, Johnson and Beck),” Sandman said — the kind of reach that could make a young product company instantly popular. “Some were telling them, if they post on social media, we will give you equity,” Sandman added, referring to partial ownership in a company. “They had no idea what any of that meant.”
Sandman said the social media stars attached to Animal Capital are shrewd. They recognize their limitations and are constantly learning. Perhaps most importantly, they don’t want to stretch themselves too far, he said.
“I can’t take credit for how entrepreneurial they are,” he said. “They understand that social media stardom comes and goes in cycles,” and watched previous generations struggle to remain relevant once their preferred platform lost popularity.
At the moment, “they are able to move product and get things on shelves and off of shelves,” Sandman said. “It is really about harnessing that power and then not diluting it. They can only do so much advertising before people get fatigued.”
Because of their booming popularity and a sense that they know what Gen Zers like, Animal Capital is able to get access to influential business leaders. Sandman said advisers and investors in Animal Capital include Anthony Scaramucci; former TikTok CEO Kevin Mayer; Sean Rad, the founder of dating app Tinder; and Tyler and Cameron Winklevoss, the twins famous for investing in Bitcoin and a claim that Mark Zuckerberg stole the idea for Facebook from them.
The Animal Capital fund is relatively small — a total of $15 million. That’s too small to lead a significant round for a startup. But Sandman said Animal is maximizing its reach by connecting with much larger investors. By using its connections to follow firms with a track record, Animal can take advantage of their due diligence.
Animal has invested alongside Andreeseen Horowitz in a live-streaming shopping platform called Whatnot. It joined Bessemer Venture Partners in putting money into Chums, a social site where users recommend and review products.
They also recently invested in Durham-based Lolli, a startup that turns shopping rewards into Bitcoin and has received investments from Alexis Ohanian, a cofounder of the social media site Reddit, and the actor Ashton Kutcher.
Sandman said Animal likes writing checks in the $100,000 to $200,000 range, adding he wouldn’t be surprised if it has invested all $15 million of its fund by the end of the year.
For Sandman, Animal Capital represented an opportunity to work at a smaller firm — something he wanted to do after working for some of the largest corporations in the country. He said he gained a lot of experience working in venture capital at WarnerMedia, but the company struggled while he was there, laying off many colleagues and usually failing to invest in projects his team identified.
“Any time anyone tried to spend money, AT&T shut it down,” he said. In May, AT&T sold its WarnerMedia division to Discovery in a deal worth $43 billion.
Sandman, a graduate of Ravenscroft School, has been telling his partners about the growing entrepreneurial scene in the Triangle. The company has held talks with founders in the region, but outside of Lolli, no deal has been struck.
Sandman has also looked at real estate in the area, after enjoying coming home during the pandemic.
“We are really agnostic” about what geographic areas Animal invests in, Sandman said. “Josh (who is originally from Toronto) would love if we focused on some Canadian founders ... so we always take a look at companies that are Toronto based.
“And I am going to spend more time on the Triangle.”
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work. Learn more; go to bit.ly/newsinnovate.
This story was originally published June 17, 2021 at 7:00 AM.
